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Brexit deal will see a £470 real terms cut in worker pay every year

Brexit Tower Bridge is seen in the background as workers cross London Bridge during the morning rush hour in London, Britain, September 8, 2021. REUTERS/Toby Melville
Brexit is damaging the UK’s competitiveness and hitting workers’ pay. Photo: Toby Melville/Reuters (Toby Melville / reuters)

Brexit will make the country poorer in the decade ahead, with workers set to loose around £500 in pay every year, research shows.

The Resolution Foundation think tank and academics from the London School of Economics said the average worker in Britain was now on course to suffer more than £470 in lost pay each year by 2030 after rising living costs are taken into account, compared with a remain vote in 2016.

“A less open Great Britain is expected to be poorer and less productive,” the report said.

Read more: Brexit cost UK economy billions in lost trade and investment

Output of the UK fishing industry is expected to decline by 30% and some workers will face “painful adjustments” in the decade ahead, said the Resolution Foundation.

One of the worst hit sectors of the UK economy will be the manufacture of electrical equipment, which is particularly reliant on cross-border supply chains. In contrast, the manufacture of food products is set to grow post-Brexit as it supplies the UK market.

On a regional level, the North East is expected to be hit hardest by Brexit – as its firms are particularly reliant on exports to the EU – while the East of England (which has a high share of food manufacturing) and Scotland are expected to outperform the rest of the country.

The report revealed that the immediate impact of the Brexit referendum result has been clear, with a depreciation-driven inflation spike increasing the cost of living for households, and business investment falling.

However, trade patterns did not respond until the introduction of the TCA in January 2021, with the overlap of the COVID-19 pandemic making it harder to assess its initial impact.

The Foundation said that the UK hasn’t seen a large relative decline in its exports to the EU that many predicted, although UK imports from the EU have fallen more swiftly than those from the rest of the world.

Britain saw a sharp decline in trade openness (total trade as a share of GDP) since 2019 – a fall of 8 percentage points. France, which has a similar trade profile to the UK, has experienced a far smaller 2 percentage-point fall over the same period.

The UK also lost market share across three of its largest non-EU goods import markets in 2021: the US, Canada and Japan.

Watch: EU refuses to rule out suspending Brexit trade deal

“The full effect of the TCA will take years to be felt but this move towards a more closed economy, will make the UK less competitive, which in turn will reduce productivity and real wages,” it said.

“The research estimates that labour productivity will be reduced by 1.3% by the end of the decade by the changes in trading rules alone. This will contribute to weaker wage growth, with real pay set to be £470 per worker lower each year, on average, than it would otherwise have been.”

Read more: UK braced for more economic gloom amid rising inflation and falling investment

Sophie Hale, principal economist at the Resolution Foundation, said: “Brexit represents the biggest change to Britain’s economic relationship with the rest of the world in half a century. This has led many to predict that it would cause a particularly big fall in exports to the EU, and fundamentally reshape Britain’s economy towards more manufacturing.

“The first of these has not come to pass, and the second looks unlikely to do so. Instead, Brexit has had a more diffuse impact by reducing the UK’s competitiveness and openness to trade with a wider range of countries.”

Watch: Minister describes UK's shrinking economy as 'disappointing'